Forty years ago, credit unions created something that actuallyturned out to be a miracle: the corporate credit union system.

Of course, they didn't know it would be a miracle in thebeginning. They created something out of nothing ever seen beforein the financial history of our country–a wholesale financialentity created for service, not for profit. The leagues and CUNAwere the prime movers of this initial effort. Without them, itmight never have happened.

In the early '70s, virtually every CU in the nation had a bankaccount. The banks gave reasonable service and earned significantprofits from this arrangement. When credit unions needed to borrow,they borrowed from a bank or savings and loan. When they had moneyto invest, they most often invested it with a bank or S&L.

But for credit unions, there was a flaw in this system. Banksdealt with other banks as other financial institutions, giving themspecial rates for doing business with them. Yet they treated creditunions like any merchant on the corner.

They did offer free checking as long as the CUs kept theirnonearning balances with the banks. Of course, the banks earned farmore on those balances than it cost them to offer freechecking.

After CUNA and the leagues created corporate credit unions,corporate staff members saw how the banks were handling creditunion customers, and they began to educate credit unions. Theysuggested credit unions ask for a monthly bank analysis of theiraccount. Many banks resisted; they didn't want credit unions toknow about their big profits from their business. But it didn'ttake long for credit unions to realize they were enriching bank andS&L stockholders.

Perhaps more than any other factor, realizing the scope of bankearnings propelled the growth of the soon-to-be massive miracle wecall the corporate credit union system. As credit unions began toshift their daily balances to their local corporate and receivehard-dollar earnings, corporates began to grow and add services.This allowed credit unions to earn higher rates and borrow at lowerrates.

As the years passed, most corporates were offering virtuallyevery service offered by a bank or other financial organization.They worked hard to hire the expertise needed to assist membercredit unions as the complexity of credit unions' needsevolved.

After all, that's why corporates were created: to serve theirmember credit unions. Nowhere else in the world were thereorganizations whose people started the day asking, “How can we makethings better for credit unions today?”

Daily, more than $4 billion moved through the corporates in asafe, secure and mutually profitable system. In turn, credit unionscould offer higher investment returns and lower borrowing rates totheir members, rather than feeding bank stockholders.

It truly was a miracle.

But the very efficiency of the system createdone problem that would come to haunt us. It functioned so well thatcredit unions became complacent. They didn't have to think aboutit, and in fact, many board members never understood why thissystem had come about or what drove its success. How manypeople really reflect on something that works fine, like the air webreathe or the light that comes on with a flick of a switch? Thiscomplacency caused a problem.

When the national economy began its meltdown a few years ago,who could have predicted it? President Bush in his book, DecisionPoints, wrote he was caught by complete surprise. The FederalReserve, Treasury, AIG, Lehman Brothers, Wall Street, privateinvestors, the rating agencies, the NCUA and nearly everyone elsehad no idea what was coming or how severe this economic downturnwould be.

Can anyone reasonably conclude that the staff at U. S. Centralor the corporates should have been more prescient than our nation'sleaders or the most respected financial professionals in thecountry? All recriminations aside, what happened, happened. Theissue now is, “Where do we go from here?”

Some credit union boards, not understanding the miracle creditunions created in establishing corporates, have stated that afterlosing so much capital, they absolutely will never support any newcorporate. Their mindset is like one involved in a devastating carwreck who declares, “I'll never get in another car!”

The NCUA acknowledges being caught unprepared, just likeeveryone else. The NCUA also realizes it did not (and does not)have the budget to hire the expertise to oversee the huge, highlytechnical, complex credit unions called corporates. No one'sfault.

But after meticulous and extensive study to create newguidelines, new methods and new oversight procedures, the NCUA hasfinally approved some conserved corporates to start again if creditunions support them, as Chairman Matz has said. It is vital that wedo so. We need to recreate this system to provide the crucialcredit union-focused services that are needed, and do it in a waythat absorbs the lessons of the past few years.

Despite the difficulties we have weathered, the eternalquestions of yesteryear are just as valid today: “Why should creditunions pass on any profits to bank shareholders instead of theirown members?” “Why would we want to give our business to any entitythat, frankly, hopes we fail?”

Of course, without the support (and volumes) of larger creditunions, it will be cost-prohibitive for most small credit unions tocontinue. But my bet is that most of the large credit unions knowwe are in this together. And I am optimistic that those that areforward-thinking will support a credit-union-based solution.

It is time to recreate our miracle. 

Richard M. Johnson isformer president/CEO of WesCorp.